Splits over revenue sharing emerge in energy bill supply hearing

By Nick Juliano | 05/20/2015 07:52 AM EDT

It has been a long-standing goal of Alaska Republican Sen. Lisa Murkowski to open up more of the nation’s coastline to oil and natural gas drilling and to give states a greater share of the revenues associated with offshore energy production, and a wide-ranging bill being assembled in her committee may be one avenue to do so.

It has been a long-standing goal of Alaska Republican Sen. Lisa Murkowski to open up more of the nation’s coastline to oil and natural gas drilling and to give states a greater share of the revenues associated with offshore energy production, and a wide-ranging bill being assembled in her committee may be one avenue to do so.

A trio of offshore drilling revenue-sharing bills — focused on the Arctic, Gulf of Mexico and South Atlantic — were considered yesterday at a hearing of the Energy and Natural Resources Committee, which Murkowski leads. But they ran into sharp objections from committee Democrats and a representative of the Obama administration, suggesting Murkowski may have to moderate her ambitions in order to secure bipartisan support and win the president’s signature.

The hearing also focused on various suggestions to ease hydropower development that were generally less controversial, an indication that they may more easily make it into a broader package. Several witnesses and senators touted hydropower’s carbon-free profile, which they said would be an important ingredient for states and utilities to comply with U.S. EPA’s impending Clean Power Plan to limit greenhouse gas emissions from existing power plants.


The witnesses included Bureau of Ocean Energy Management Director Abigail Ross Hopper, who defended the administration’s recently proposed drilling plan for 2017-2022. Hopper also noted the administration’s objections to the trio of offshore drilling bills — S. 1278, from Murkowski, to expand drilling and revenue sharing in the Arctic; S. 1276, from Sen. Bill Cassidy (R-La.), to authorize drilling in the eastern Gulf of Mexico and raise an existing cap on revenue shared with Gulf states; and S. 1279, from Sen. Mark Warner (D-Va.), to expand drilling in the South Atlantic and split revenues between the federal government and four East Coast states.

Hopper objected to the bills’ call for additional drilling beyond what is envisioned in the current five-year plan without relying on the Interior secretary’s "discretion" to determine whether such activity was appropriate. And while she said the administration appreciates the concerns of coastal states that would like to see additional drilling revenues, she defended the proposal to redirect some of the existing share provided by the Gulf of Mexico Energy Security Act "to programs that provide broad natural resource, watershed and conservation benefits to the nation."

Murkowski said she was "discouraged" by Hopper’s reaction to the bills and the administration’s proposal to redirect existing revenues away from Gulf states, an approach the senator said reversed a previous commitment from Interior Secretary Sally Jewell to "work with" coastal lawmakers on a bipartisan revenue-sharing proposal.

"To hear your comments that effectively the way you want to work with us is to redirect existing revenue payments … not to the states that are impacted, but basically to pull the rug out from under the promise that was already made, is a little bit disconcerting," Murkowski said.

Murkowski’s approach to the Interior Department stood in contrast to the relationship she has developed with the Department of Energy and Secretary Ernest Moniz, who testified before the committee earlier this year. While Murkowski has said she is looking to DOE’s Quadrennial Energy Review as a template for parts of her energy bill, including its infrastructure provisions, she also has repeatedly tussled with Interior over other issues, including her long-running push to authorize a gravel road through a wildlife reserve to a remote Alaskan village and the administration’s approach to energy exploration.

Sen. Maria Cantwell (D-Wash.), the committee’s ranking member, separately criticized the revenue-sharing push, noting that previous such proposals have been found to increase the deficit, raising objections from budget hawks. Sen. Al Franken (D-Minn.) also objected to the focus on offshore drilling and revenue sharing, pointing to increased greenhouse gas emissions that would result from additional fossil fuel development and saying the committee’s focus should be on clean technologies such as biomass and combined heat and power as well as energy efficiency.

Revenue-sharing proposals in previous years have "brought this committee to a standstill," Cantwell warned in her opening statement.

Still, Hopper was not ready to declare revenue sharing a poison pill for the administration’s ability to support a broader energy bill.

"I think Senator Cantwell said it well that revenue sharing has always been a contentious issue in this committee. I think it would be premature to say that it would take any comprehensive energy package down," Hopper told reporters after the hearing. "I think it’s one of the things obviously that’s important to many of the senators, either pro or con. So I think it’s likely to be in the nexus as she develops an energy package going forward."

Murkowski spokesman Robert Dillon said revenue-sharing is "crucial to developing the infrastructure we need in the Arctic" and that Murkowski would "continue to work it until it becomes a reality." That said, a comprehensive energy bill is not the only option, Dillon added. Murkowski could also offer amendments to other must-pass pieces of legislation, seek to bring a revenue sharing bill to the floor on its own or attempt to use the appropriations process to change the policy.

Murkowski also is chairwoman of the Appropriations subcommittee with jurisdiction over the Interior Department, but Dillon declined to go into detail on how she could use a spending bill to change policy, given traditional resistance to using appropriations measures to enact authorization legislation.

Yesterday’s hearing focused on energy supply, the third of four pillars on which Murkowski is building a comprehensive energy bill that she hopes to see win bipartisan backing and be signed into law for the first time since 2007. The committee already considered efficiency and infrastructure issues; next month will see a final hearing focused on "accountability and reform" at the Department of Energy.

Yesterday’s agenda also included recently introduced legislation from Sen. Tom Udall (D-N.M.) and other Democrats to establish a renewable energy standard (RES) that would require 30 percent of energy that utilities provide by 2030 to come from sources such as wind and solar. The proposal (S. 1264) won an endorsement from the Natural Resources Defense Council but opposition from the American Public Power Association during the hearing.

In focusing on supply, Murkowski said her goal is an "all of the above" portfolio that would include fossil fuels and renewable energy, with a focus on keeping energy affordable and widely available.

The hearing agenda included several bills aimed at promoting hydropower, including Murkowski’s S. 1236, which aims to streamline the licensing process and define hydropower as a renewable energy source for the sake of federal energy targets, and S. 1270 from Sen. Cory Gardner (R-Colo.) to extend an incentive program that gives dam owners who install new hydropower turbines payments for their production equivalent to the 2.3 cents per kilowatt-hour provided under the expired production tax credit for other types of renewable energy.

One witness, Franz Matzner of the Natural Resources Defense Council, said he is wary of efforts to broadly define hydro as a source of renewable energy in the context of complying with state renewable energy standards because of its effect on other resources and susceptibility to drought conditions. But he stressed that it is an important source of clean energy.

American Public Power Association CEO Susan Kelly said hydro will be necessary for utilities to continue to provide reliable power as they transition their broader fleets in response to EPA’s Clean Power Plan and other regulations causing some coal plants to shut down.

Murkowski noted that most people tend to think of massive projects like the Hoover Dam when they think of hydropower, but she said the reality is mostly smaller projects that are nonetheless difficult and time-consuming to permit. On that point, she found agreement on the other side of the aisle from Maine Sen. Angus King, an independent who caucuses with Democrats.

King, a former utility lawyer, has been among the committee members most involved in energy bill hearings to this point. He was the only ENR Committee member besides Murkowski who attended the duration of yesterday’s hearing. While he asked few questions — saying he was there mainly to learn — King commiserated with the plight of hydro developers.

"Any permitting program that takes seven to 10 years and costs $150 million isn’t a permitting program," King said. "It’s an annuity for lawyers and consultants."